\contentsline {chapter}{\numberline {1}Introduction}{4}
\contentsline {section}{\numberline {1.1}Introduction}{4}
\contentsline {section}{\numberline {1.2}Major Conclusions and Paper Structure}{9}
\contentsline {chapter}{\numberline {2}Relevant Literature}{11}
\contentsline {section}{\numberline {2.1}Optimal beliefs}{11}
\contentsline {section}{\numberline {2.2}Reference dependent utilities}{14}
\contentsline {section}{\numberline {2.3}Biased beliefs in asset pricing}{15}
\contentsline {chapter}{\numberline {3}The Model}{18}
\contentsline {section}{\numberline {3.1}The Utility Function}{18}
\contentsline {section}{\numberline {3.2}Optimal Beliefs}{20}
\contentsline {section}{\numberline {3.3}A Short Application: Information Timing preference}{24}
\contentsline {section}{\numberline {3.4}An Example}{26}
\contentsline {chapter}{\numberline {4}Risk Attitude: Choice between two lotteries}{31}
\contentsline {section}{\numberline {4.1}An Naive Agent}{33}
\contentsline {section}{\numberline {4.2}A Sophisticated Agent}{36}
\contentsline {chapter}{\numberline {5}Application: Portfolio Choice}{41}
\contentsline {section}{\numberline {5.1}Choice between one risk-free asset and one risky asset}{42}
\contentsline {subsection}{\numberline {5.1.1}Naive Agent}{44}
\contentsline {subsection}{\numberline {5.1.2}Sophisticated Agent}{47}
\contentsline {section}{\numberline {5.2}Equilibrium}{50}
\contentsline {paragraph}{Naive}{50}
\contentsline {paragraph}{Sophisticated}{51}
\setChapterprefix {Appendix }
\contentsline {chapter}{\numberline {A}}{55}
\contentsline {chapter}{\numberline {B}}{64}
